The Amazon Effect

The Amazon Effect

Amazon got big fast, hastening the arrival of digital publishing. But how big is too big?

May 29, 2012

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From the start, Jeff Bezos wanted to “get big fast.” He was never a “small is beautiful” kind of guy. The Brobdingnagian numbers tell much of the story. In 1994, four years after the first Internet browser was created, Bezos stumbled upon a startling statistic: the Internet had been growing at the rate of 2,300 percent annually. In 1995, the year Bezos, then 31, started Amazon, just 16 million people used the Internet. A year later, the number was 36 million, a figure that would multiply at a furious rate. Today, more than 1.7 billion people, or almost one out of every four humans on the planet, are online. Bezos understood two things. One was the way the Internet made it possible to banish geography, enabling anyone with an Internet connection and a computer to browse a seemingly limitless universe of goods with a precision never previously known and then buy them directly from the comfort of their homes. The second was how the Internet allowed merchants to gather vast amounts of personal information on individual customers.

The Internet permitted a kind of bespoke selling. James Marcus, who was hired by Bezos in 1996 and would work at Amazon for five years, later published a revealing memoir of his time as Employee #55. He recalls Bezos insisting that the Internet, with “its bottomless capacity for data collection,” would “allow you to sort through entire populations with a fine-tooth comb. Affinity would call out to affinity: your likes and dislikes—from Beethoven to barbecue sauce, shampoo to shoe polish to Laverne & Shirley—were as distinctive as your DNA, and would make it a snap to match you up with your 9,999 cousins.” This prospect, Marcus felt, “was either a utopian daydream or a targeted-marketing nightmare.”

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Whichever one it was, Bezos didn’t much care. “You know, things just don’t grow that fast,” he observed. “It’s highly unusual, and that started me thinking, ‘What kind of business plan might make sense in the context of that growth?’” Bezos decided selling books would be the best way to get big fast on the Internet. This was not immediately obvious: bookselling in the United States had always been less of a business than a calling. Profit margins were notoriously thin, and most independent stores depended on low rents. Walk-in traffic was often sporadic, the public’s taste fickle; reliance on a steady stream of bestsellers to keep the landlord at bay was not exactly a sure-fire strategy for remaining solvent.

Still, overall, selling books was a big business. In 1994 Americans bought $19 billion worth of books. Barnes & Noble and the Borders Group had by then captured a quarter of the market, with independent stores struggling to make up just over another fifth and a skein of book clubs, supermarkets and other outlets accounting for the rest. That same year, 513 million individual books were sold, and seventeen bestsellers each sold more than 1 million copies. Bezos knew that two national distributors, Ingram Book Group and Baker & Taylor, had warehouses holding about 400,000 titles and in the late 1980s had begun converting their inventory list from microfiche to a digital format accessible by computer. Bezos also knew that in 1992 the Supreme Court had ruled in Quill Corp. v. North Dakota that retailers were exempt from charging sales tax in states where they didn’t have a physical presence. (For years, he would use this advantage to avoid collecting hundreds of millions of dollars in state sales taxes, giving Amazon an enormous edge over retailers of every kind, from bookstores to Best Buy and Home Depot. In recent months, however, Amazon, under mounting pressure, has eased its opposition and reached agreements with twelve states, including California and Texas, to collect sales tax.) “Books are incredibly unusual in one respect,” Bezos said, “and that is that there are more items in the book category than there are items in any other category by far.” A devotee of the Culture of Metrics, Bezos was undaunted. He was sure that the algorithms of computerized search and access would provide the keys to a consumer kingdom whose riches were as yet undiscovered and barely dreamed of, and so he set out to construct a twenty-first-century ordering mechanism that, at least for the short term, would deliver goods the old-fashioned way: by hand, from warehouses via the Postal Service and commercial shippers.

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One of Amazon’s consultants was publishing visionary Jason Epstein. In 1952 Epstein founded Anchor Books, the highbrow trade paperback publisher; eleven years later he was one of the founders of the New York Review of Books, and for many decades was an eminence at Random House. His admiration for Bezos was mixed with a certain bemusement; he knew that for Amazon to really revolutionize bookselling, physical books would have to be transformed into bits and bytes capable of being delivered seamlessly. Otherwise, Bezos would have built only a virtual contraption hostage to the Age of Gutenberg, with all its cumbersome inefficiencies. But Epstein could not fathom that the appeal of holding a physical book in one’s hand would ever diminish. Instead, he dreamed of machines that would print on demand, drawing upon a virtual library of digitized books and delivering physical copies in, say, Kinkos all across the country. The bookstores that might survive in this scenario would be essentially stocking examination copies of a representative selection of titles, which could be individually printed while customers lingered at coffee bars awaiting the arrival of their order. Ultimately, Epstein would devote himself to this vision.

Bezos looked elsewhere, convinced that one day he could fashion an unbroken chain of ordering and delivering books, despite the deep losses Epstein warned he’d have to sustain to do so. But first he had to insert the name of his new company into the frontal lobe of America’s (and not only America’s) consumers. Like all great and obsessed entrepreneurs, his ambitions were imperial, his optimism rooted in an overweening confidence in his own rectitude. He aimed to build a brand that was, in Marcus’s phrase, “both ubiquitous and irresistible.” A decade before, while a student at Princeton in the mid-1980s, he had adopted as his credo a line from Ray Bradbury, the author of Fahrenheit 451: “The Universe says No to us. We in answer fire a broadside of flesh at it and cry Yes!” (Many years later, the octogenarian Bradbury would decry the closing of his beloved Acres of Books in Long Beach, California, which had been unable to compete with the ever-expanding empire of online bookselling.) A slightly built, balding gnome of a man, Bezos often struck others as enigmatic, remote and odd. If not exactly cuddly, he was charismatic in an otherworldly sort of way. A Columbia University economics professor who was an early boss of Bezos’ said of him: “He was not warm…. It was like he could be a Martian for all I knew. A well-meaning, nice Martian.” Bill Gates, another Martian, would welcome Bezos’ arrival to Seattle, saying, “I buy books from Amazon.com because time is short and they have a big inventory and they’re very reliable.” Millions of book-buyers would soon agree.

As the editor of the Los Angeles Times Book Review, I had watched Bezos’ early rise with admiration, believing that whatever complications he was bringing to the world of bookselling were more than compensated for by the many ways he was extending reader access to a greater diversity of books. After all, even the larger 60,000-square-foot emporiums of Barnes & Noble and Borders could carry no more than 175,000 titles. Amazon, by contrast, was virtually limitless in its offerings. Bezos was then, as he has been ever since, at pains to assure independent bookstores that his new business was no threat to them. He claimed that Amazon simply provided a different service and wasn’t trying to snuff bricks-and-mortar stores. Independent booksellers weren’t so sure.

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In the mid- to late 1990s, when online bookselling was in its infancy, Barnes & Noble and Borders were busy expanding their empires, often opening stores adjacent to long-established community bookstores. The independents were alarmed by these and other aggressive strategies. The chain stores could give customers deeply discounted offerings on a depth of stock made possible by favorable publishers’ terms not extended to independents. Clerks at the chains might not intimately know the tastes and predilections of the surrounding neighborhood, but the price was right: lower was better, lowest was best.

The death toll tells the tale. Two decades ago, there were about 4,000 independent bookstores in the United States; only about 1,900 remain. And now, even the victors are imperiled. The fate of the two largest US chain bookstores—themselves partly responsible for putting smaller stores to the sword—is instructive: Borders declared bankruptcy in 2011 and closed its several hundred stores across the country, its demise benefiting over the short term its rival Barnes & Noble, which is nonetheless desperately trying to figure out ways to pay the mortgage on the considerable real estate occupied by its 1,332 stores across the nation. It is removing thousands of physical books from stores in order to create nifty digital zones to persuade customers to embrace the Nook e-book readers, the company’s alternative to Amazon’s Kindle. Persistent rumors that B&N’s owners wish to sell regularly sweep the corridors of publishing. But the very idea of owning a bookstore strikes most savvy investors as forlorn. In recent weeks, Microsoft Corp. decided to challenge Amazon by investing $605 million in B&N’s digital-book business, an arrangement that calls for sharing revenue from e-book sales and other content.

For many of us, the notion that bricks-and-mortar bookstores might one day disappear was unthinkable. Jason Epstein put it best in Book Business, his incisive 2001 book on publishing’s past, present and future, when he offered what now looks to be, given his characteristic unsentimental sobriety, an atypical dollop of unwarranted optimism: “A civilization without retail bookstores is unimaginable. Like shrines and other sacred meeting places, bookstores are essential artifacts of human nature. The feel of a book taken from the shelf and held in the hand is a magical experience, linking writer to reader.”

That sentiment is likely to strike today’s younger readers as nostalgia bordering on fetish. Reality is elsewhere. Consider the millions who are buying those modern Aladdin’s lamps called e-readers. These magical devices, ever more beautiful and nimble in design, have only to be lightly rubbed for the genie of literature to be summoned. Appetite for these idols, especially among the young, is insatiable. For these readers, what counts is whether and how books will be made available to the greatest number of people at the cheapest possible price. Whether readers find books in bookstores or a digital device matters not at all; what matters is cost and ease of access. Walk into any Apple store (temples of the latest fad) and you’ll be engulfed by the near frenzy of folks from all walks of life who seemingly can’t wait to surrender their hard-earned dollars for the latest iPad, Apple’s tablet reader, no matter the constraints of a faltering economy. Then try to find a bookstore. Good luck. If you do, you’ll notice that fewer books are on offer, the aisles wider, customers scarce. Bookstores have lost their mojo.

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The bookstore wars are over. Independents are battered, Borders is dead, Barnes & Noble weakened but still standing and Amazon triumphant. Yet still there is no peace; a new war rages for the future of publishing. The recent Justice Department lawsuit accusing five of the country’s biggest publishers of illegally colluding with Apple to fix the price of e-books is, arguably, publishing’s Alamo. What angered the government wasn’t the price, but the way the publishers seemed to have secretly arranged to raise it. Many publishers and authors were flabbergasted, accusing the Obama administration of having gone after the wrong culprit. Scott Turow, president of the Authors Guild, denounced the suit, as did David Carr, the media critic of the New York Times, who said it was “the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ‘N’ Groceries on Route 19 instead.” On its face, the suit seemed an antitrust travesty, a failure to go after the “monopolistic monolith” that is, as the Times put it, “publishing’s real nemesis.” In this view, the biggest threat is Amazon’s willingness to sell e-books at a loss in order to seduce millions of unwitting consumers into the leviathan’s cornucopia of online goods and services. What is clear is that “legacy publishing,” like old-fashioned bookselling, is gone. Just as bookselling is increasingly virtual, so is publishing. Technology democratizes both the means of production and distribution. The implications for traditional publishers are acute.

Amazon, not surprisingly, is keen to sharpen its competitive edge, to use every means at its disposal to confound, stymie and overpower its rivals. It is well positioned to do so: the introduction of the Amazon Kindle in 2007 led to a startling surge in e-book sales, which until then had been insignificant. Soon it was not unusual to see e-book sales jump by 400 percent over the previous year. An estimated 3 million e-readers were sold in 2009, the year Amazon began to sell its Kindle 2, the first e-reader available globally. Bezos called the Kindle a response to “the failings of a physical book…. I’m grumpy when I’m forced to read a physical book because it’s not as convenient. Turning the pages…the book is always flopping itself shut at the wrong moment.” Millions of people agreed and millions of Kindles were bought (though Amazon refuses to reveal exact numbers). Competing devices—including the Nook and the iPad, to name but two of the most prominent—began to proliferate and to give Amazon’s Kindle a run for its money, thanks to the e-book pricing arrangement between some publishers and Apple that attracted the ire of the Justice Department. Barely a year after Apple launched the iPad, it had sold more than 15 million worldwide. Just three years ago, only 2 percent of Americans had an e-reader or a tablet; by January of this year, the figure was 28 percent. And Amazon, despite watching its market share drop from 90 percent of the American e-book market in 2010 to about 55–60 percent today, reached a milestone just under three years after the Kindle was introduced. “Amazon.com customers now purchase more Kindle books than hardcover books,” Bezos crowed, “astonishing when you consider that we’ve been selling hardcover books for 15 years, and Kindle books for 33 months.”

How the Digital Age might alter attention spans and perhaps even how we tell one another stories is a subject of considerable angst. The history of writing, however, gives us every reason to be confident that new forms of literary excellence will emerge, every bit as rigorous, pleasurable and enduring as the vaunted forms of yesteryear. Perhaps the discipline of tapping 140 characters on Twitter will one day give rise to a form as admirable and elegant as haiku was in its day. Perhaps the interactive features of graphic display and video interpolation, hyperlinks and the simultaneous display of multiple panels made possible by the World Wide Web will prompt new and compelling ways of telling one another the stories our species seems biologically programmed to tell. Perhaps all this will add to the rich storehouse of an evolving literature whose contours we have only begun to glimpse, much less to imagine.

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One thing, however, is certain, and about it publishers agree: e-book sales as a percentage of overall revenue are skyrocketing. Initially such sales were a tiny proportion of overall revenue; in 2008, for instance, they were under 1 percent. No more. The head of one major publisher told me that in 2010 e-book sales accounted for 11 percent of his house’s revenue. By the end of 2011 it had more than tripled to 36 percent for the year. As John Thompson reports in the revised 2012 edition of his authoritative Merchants of Culture, in 2011 e-book sales for most publishers were “between 18 and 22 percent (possibly even higher for some houses).” Hardcover sales, the foundation of the business, continue to decline, plunging 13 percent in 2008 and suffering similar declines in the years since. According to the Pew Research Center’s most recent e-reading survey, 21 percent of American adults report reading an e-book in the past year. Soon one out of every three sales of adult trade titles will be in the form of an e-book. Readers of e-books are especially drawn to escapist and overtly commercial genres (romance, mysteries and thrillers, science fiction), and in these categories e-book sales have bulked up to as large as 60 percent. E-book sales are making inroads even with so-called literary fiction. Thompson cites Jonathan Franzen’s Freedom, published in 2010 by Farrar, Straus & Giroux, one of America’s most distinguished houses and one of several American imprints now owned by the German conglomerate Holtzbrinck. Franzen’s novel sold three-quarters of a million hardcover copies and a quarter-million e-books in the first twelve months of publication. (Franzen, by the way, detests electronic books, and is also the guy who dissed Oprah when she had the gumption to pick his earlier novel, The Corrections, for her popular book club.) Did Franzen’s e-book sales depress his hardcover sales, or did the e-book iteration introduce new readers to his work? It’s hard to know, but it’s likely a bit of both.

The inexorable shift in the United States from physical to digital books poses a palpable threat to the ways publishers have gone about their business. Jason Epstein got it right two years ago when he wrote, “The resistance today by publishers to the onrushing digital future does not arise from fear of disruptive literacy, but from the understandable fear of their own obsolescence and the complexity of the digital transformation that awaits them, one in which much of their traditional infrastructure and perhaps they too will be redundant.” Traditional publishers, he argued, have only themselves to blame, many (perhaps even most) of their wounds having been self-inflicted. They have been too often complacent, allergic to new ideas, even incompetent. Their dogged and likely doomed defense of traditional pricing strategies has left them vulnerable to Amazon’s predatory pricing practices. Peter Mayer, former CEO of Viking/Penguin and now owner and publisher of the independent Overlook Press, agrees: “Publishers clearly need to newly prove to readers and authors the value that publishers add.” That value, he concedes, is no longer a given.

The inability of most traditional publishers to successfully adapt to technological change may be rooted in the retrograde editorial and marketing culture that has long characterized the publishing industry. As one prominent literary agent told me, “This is a business run by English majors, not business majors.” A surpassing irony: for years many of us worried that the increasing conglomeration of publishers would reduce diversity. (We were wrong.) We also feared bloated overheads would hold editors hostage to an unsustainable commercial imperative. (We were right.) But little did we imagine that the blunderbuss for change would arrive in the form of an avaricious imperium called Amazon. It is something of a surprise to see so many now defending the practices of corporate publishers who, just yesterday, were excoriated as philistines out to coarsen the general culture.

Epstein, for one, doesn’t fear Amazon, writing recently that the company’s “strategy, if successful, might force publishers to shrink or even abandon their old infrastructure.” Thus will publishing collapse into the cottage industry it was “in the glory days before conglomeration.” Epstein insists that the dialectic Amazon exemplifies is irreversible, “a vivid expression of how the logic of a radical new and more efficient technology impels institutional change.”

Not very long ago it was thought no one would read a book on a computer screen. That assumption is now demonstrably wrong. Today, whether writers will continue to publish the old-fashioned way or go over to direct online publishing is an open question. How it will be answered is at the heart of the struggle taking place between Amazon and traditional publishers.

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Jeff Bezos got what he wanted: Amazon got big fast and is getting bigger, dwarfing all rivals. To fully appreciate the fear that is sucking the oxygen out of publishers’ suites, it is important to understand what a steamroller Amazon has become. Last year it had $48 billion in revenue, more than all six of the major American publishing conglomerates combined, with a cash reserve of $5 billion. The company is valued at nearly $100 billion and employs more than 65,000 workers (all nonunion); Bezos, according to Forbes, is the thirtieth wealthiest man in America. Amazon may be identified in the public mind with books, but the reality is that book sales account for a diminishing share of its overall business; the company is no longer principally a bookseller. Amazon is now an online Walmart, and while 50 percent of its revenues are derived from music, TV shows, movies and, yes, books, another 50 percent comes from a diverse array of products and services. In the late 1990s Bezos bought IMDb.com, the authoritative movie website. In 2009 he went gunning for bigger game, spending nearly $900 million to acquire Zappos.com, a shoe retailer. He also owns Diapers.com, a baby products website. Now he seeks to colonize high-end fashion as well. “Bezos may well be the premier technologist in America,” said Wired, “a figure who casts as big a shadow as legends like Bill Gates and the late Steve Jobs.”

With the introduction last fall of the Kindle Fire, Bezos is pushing an advanced mobile portal to Amazon’s cloud universe, which hosts Web operations for a wide variety of companies and institutions, including Netflix, the New York Times, NASA’s Jet Propulsion Laboratory, Tina Brown’s Newsweek/Daily Beast, PBS, Virgin Atlantic and the Harvard Medical School, among others. As Wired put it, when you buy the Kindle Fire, “you’re not buying a gadget—you’re filing citizen papers for the digital duchy of Amazonia.” For his part, Daniel Ellsberg of Pentagon Papers fame recently renounced his “citizenship,” pulling the plug on his Amazon Prime membership and calling for a boycott of Amazon after he discovered that the company had buckled under pressure from Washington and scrubbed WikiLeaks from its Web servers. Not unlike small independent bookstores, bricks-and-mortar retailers such as Walmart, Home Depot and Best Buy are feeling the ground give way beneath them. Target is fighting back, declaring that it will no longer sell Kindles, clearly dismayed by Amazon’s brazen promotion of a price-checking app as a means of competing with many of the goods that Target sells.

Amazon has sixty-nine data and fulfillment centers, seventeen of which were built in the past year alone, with more to come. For the thousands of often older migratory baby boomers living out of RVs, who work furiously at the centers filling customer orders at almost literally a breakneck pace, it is, by all accounts, a high-stress job. These workers are the Morlocks who make possible Amazon’s vaunted customer service. Last fall, the Morning Call investigated their plight in one of Amazon’s main fulfillment warehouses in Allentown, Pennsylvania. It found that some employees risked stroke and heat exhaustion while running themselves ragged trying to fulfill quotas that resemble the onerous conditions so indelibly satirized by Charlie Chaplin in Modern Times. Ambulances were routinely stationed in the facility’s giant parking lot to rush stricken workers to nearby hospitals. Amazon, for its part, says such problems are exceptional, and indeed by OSHA’s standards incidents of this kind are not the norm. Pursuing greater efficiencies, Amazon in March bought Kiva Systems Inc., a robot manufacturer, for $775 million. Kiva, founded in 2003 and backed by, among others, Bain Capital Ventures, claims that three to four times as many orders per hour can be packed up by a worker using its robots. For Bezos the Martian, the human factor is pesky. Now a more automated solution looms.

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In spring 2011 Amazon announced that it was hiring publishing veteran Larry Kirshbaum, former CEO of the Time-Warner Book Group, to head Amazon Publishing in New York. Kirshbaum was all but condemned by many of his publishing comrades as an apostate. Others were puzzled: Why, they wondered, would Amazon, having so spectacularly led the e-book revolution and done so much, in the words of one of its spokesmen, to “re-invent reading,” seek to become a player in the rearview world of publishing books on paper? Doing so would require building an entire infrastructure of editors, publicists and even sales representatives who would be charged with convincing America’s booksellers—by now allergic to the very idea of aiding their most agile adversary—to carry its books. Indeed, Barnes & Noble, among other booksellers, promptly said it would not sell any book published by Amazon. (It should be remembered that B&N had once tried to become a publisher itself through its purchase of Sterling Publishing, raising howls of “conflict of interest” from publishers. The perennial question of whose ox is being gored fairly begs to be asked here.) For its part, Amazon swiftly struck an alliance with Houghton Mifflin Harcourt to handle placing its books in physical stores. In a transparent subterfuge aimed at protecting its tax-avoidance strategies, Amazon intends to publish many of its books under a subsidiary imprint of Houghton’s called New Harvest, thus keeping alive the increasingly threadbare fiction that it has no physical presence in states where it does business online.

Nine months after Kirshbaum’s hire, judging by the number of deals concluded, his nascent operation rivals two of publishing’s largest companies, the French-owned Hachette and the Murdoch-owned HarperCollins. Like his boss, Kirshbaum wants to get big fast. It remains to be seen, however, whether spending a reported $800,000 to acquire Penny Marshall’s Hollywood memoirs is ultimately profitable; a number of the publishers I spoke with thought not and professed little anxiety at Amazon’s big-foot approach. They are not inclined to join the hysteria that largely greeted Kirshbaum’s defection, feeling that a recent Bloomberg Businessweek cover story depicting a book enveloped by flames had exaggerated by several orders of magnitude the actual threat posed by Amazon’s new venture. If Amazon wants to burn the book business, as the magazine’s headline blared, publishing books the old-fashioned way struck them as a peculiar way of going about it. Was there really a “secret plot to destroy literature,” as the magazine alleged? It seemed far-fetched, to say the least.

At the same time, Amazon’s New York foray might be seen as an effort to lure “legacy writers,” assuring them of a hardcover trophy and a state-of-the-art digital edition, and as such part of an overall strategy to overcome resistance among established bestselling authors to publish with the online retail giant. As one senior publishing executive said, 40 to 60 percent of the sales for the Stephen Kings, Lee Childs and John Grishams are still derived from Barnes & Noble, Walmart and Costco. Such authors, he said, “were they to walk away from their traditional publishers, would be leaving a considerable fortune on the table.” But as Amazon’s six other publishing imprints (Montlake Romance, AmazonCrossing, Thomas & Mercer, 47North, Amazon Encore, The Domino Project) have discovered, in certain genres (romance, science fiction and fantasy) formerly relegated to the moribund mass-market paperback, readers care not a whit about cover design or even good writing, and have no attachment at all to the book as object. Like addicts, they just want their fix at the lowest possible price, and Amazon is happy to be their online dealer.

James Marcus, now an editor at Harper’s Magazine, sees a particular irony in Amazon’s entry into book publishing. “When I first worked at Amazon in the mid 1990s,” he recalls, “we were advised to think of publishers as our partners. I believe this directive was in earnest. But even then, a creeping contempt for the publishing industry was sometimes discernible. Weren’t they stodgy traditionalists, who relied on rotary phones and a Depression-era business model? Well, the company is now a bona-fide trade publisher. There’s no predicting how these books will fare, especially with many retailers refusing to sell them (an embargo that won’t, of course, affect e-book sales, where Amazon still rules the roost). But Bezos may now discover that cutting out the middleman isn’t all it’s cracked up to be—that it’s surprisingly easy to fail in the neo-Victorian enterprise of publishing, especially when it comes to finding readers for worthy books. Perhaps it’s time for him to acquire a rotary phone, available in five retro colors and eligible for two-day Prime shipping on his very own site.”

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Amazon’s entry into publishing’s traditional casino is a sideshow. More worrisome, at least over the long term, is the success of Amazon’s Kindle Single program, an effort to encourage writers to make an end run around publishers, not only of books but of magazines as well. That program offers writers a chance to publish original e-book essays of no more than 30,000 words (authors agree to a bargain-basement price of no more than $2.99 in exchange for a 70 percent royalty and no advance). It has attracted Nelson DeMille, Jon Krakauer, William Vollmann, Walter Mosley, Ann Patchett, Amy Tan and the late Christopher Hitchens as well as a slew of lesser-known scribblers, some of whom have enjoyed paydays rivaling or exceeding what they might have gotten were magazines like Vanity Fair or The New Yorker to have commissioned their work. Royalties are direct-deposited monthly, and authors can check their sales anytime—a level of efficiency and transparency almost unknown at traditional publishers and magazines.

The boundaries are blurring all over publishing, as various actors have belatedly roused themselves to the necessities and blandishments of the online world. The literary agency William Morris Endeavor, for example, has launched 212 Books, an e-publishing program designed to showcase its clients, such as the estimable David Frum, a former speechwriter for President George W. Bush, whose first novel is wittingly called Patriots (first-serial rights have been placed with the Huffington Post). Endeavor is also bringing out as a direct e-book the hapless James Frey’s The Final Testament of the Holy Bible. J.K. Rowling, an empire unto herself, is releasing the Harry Potter series on her own terms and making it available through her own website, Amazon, Apple and every other conceivable digital “platform” in the known universe. Sourcebooks Inc., a medium-sized independent publisher based in Naperville, Illinois, is starting an online bookstore to sell its romance novels directly to readers for a monthly fee. Other creative online inducements for writers are being hatched at a number of publishers, including Little, Brown.

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Such efforts have scant chance of preventing Amazon from bulldozing any real or perceived obstacles to its single-minded pursuit of maximum clout. It is big enough to impose increasingly harsh terms on both its competitors and its clients. As reported by the Seattle Times, it has even begun to compel tiny indie publishers to abandon their traditional short discounts and embrace punitive larger trade discounts. When Karen Christensen of Berkshire Publishing Group refused, Amazon “stopped placing orders, affecting 10 percent of her business.”

The Independent Publishers Group, a principal distributor of about 500 small publishers, recently angered Amazon by refusing to accept the company’s peremptory demand for deeper discounts. Amazon promptly yanked nearly 5,000 digital titles. Small-press publishers were beside themselves. Bryce Milligan of Wings Press, based in Texas, spoke for most when, in a blistering broadside, he lambasted Amazon, complaining that its actions caused his sales to drop by 40 percent. “Amazon,” he wrote, “seemingly wants to kill off the distributors, then kill off the independent publishers and bookstores, and become the only link between the reader and the author…. E-book sales have been a highly addictive drug to many smaller publishers. For one thing, there are no ‘returns.’… E-book sales allowed smaller presses to get a taste of the kind of money that online impulse buying can produce. Already e-book sales were underwriting the publication of paper books-and-ink at Wings Press…. For Amazon to rip e-book sales away is a classic bait-and-switch tactic guaranteed to kill small presses by the hundreds…. There was a time not so long ago when ‘competition’ was a healthy thing, not a synonym for corporate ‘murder.’ Amazon could have been a bright and shining star, lighting the way to increased literacy and improved access to alternative literatures. Alas, it looks more likely to be a large and deadly asteroid. We, the literary dinosaurs, are watching to see if this is a near miss or the beginning of extinction.”

But Amazon isn’t the only player willing to play hardball. Random House, for example, quietly began in March to charge public libraries three times the retail price for e-books, causing Nova Scotia’s South Shore Public Libraries to call for a boycott and accuse the German-owned conglomerate of unfair e-book pricing. It gets worse: according to the New York Times, “five of the six major publishers either refuse to make new e-books available to libraries or have pulled back significantly over the last year on how easily or how often those books can be circulated.”

Jacob Stevens, the managing director of Verso, the distinguished independent press spawned by the London-based New Left Review, says of Amazon: “Having our backlist instantly and immediately available has so far outweighed the problems. For me, the problems become worse as Amazon moves from ‘just’ being a big player in selling books to vertical control of entire sections of the industry. It all gets a bit Big Brother. It’s easy to imagine Amazon muscling existing publishers out of the picture altogether and inviting authors and agents to deal directly with them. What would that do for the richness and diversity of our culture?”

And yet Amazon gives $1 million a year, in grants of about $25,000 apiece, to a wide range of independent literary journals and nonprofit organizations, including the Kenyon Review, the newly launched online Los Angeles Review of Books and even One Story, the nonprofit literary magazine devoted to the short story, which recently celebrated its tenth anniversary by honoring Ann Patchett, an outspoken critic of Bezos’ business practices and a co-owner of an independent bookstore in Nashville. Amazon’s contributions outstrip by a large factor any advertising dollars sent my way by traditional publishers during the nearly nine years I ran the Los Angeles Times Book Review. Of course, such largesse—less than a pittance of its $5 billion cash reserve—may be meant to ensnare its most articulate critics in a web of dependency. If so, Amazon will likely be surprised, as the editors of such journals have well-deserved reputations for biting the hand that feeds, and they prize their contrarian sensibilities.

Another bookselling veteran made uneasy by Amazon’s colossal success is Andy Ross, who—having succeeded the venerable Fred Cody as the owner of Cody’s Books in Berkeley until online competition forced its flagship location to close in 2006, after fifty years in business—now works in Oakland as a literary agent. “Monopolies are always problematic in a free society, and they are more so when we are dealing with the dissemination of ideas, which is what book publishing is about,” he told me. “In the realm of electronic publishing, Amazon until recently controlled about 90 percent of the market, a monopoly by almost anyone’s definition. Most people bought their e-books in the proprietary Kindle file format that could only be purchased from Amazon and only read on the Kindle reader that was manufactured by Amazon. Other makers of e-book readers designed them to accept the open-source e-pub format that allowed customers to have a wider choice of retailers to supply them with e-books. Since then, Amazon’s market share has been declining, but 60 percent of all e-books in America continue to be sold by Amazon in the Kindle file format. Amazon simply has too much power in the marketplace. And when their business interest conflicts with the public interest, the public interest suffers.”

It’s a fair point—one that also plagues Peter Mayer of Overlook Press: “All sides of this argument need to think deeply—not just about their businesses, but also about their world. I grew up in a world in which many parts together formed a community adversarial in a microcosmic way but communal in a larger sense: authors, editors, agents, publishers, wholesalers, retailers and readers. I hope, worried as I am about the current trajectory [of publishing], that we do not look back one day, sitting on a stump as the boy does in Shel Silverstein’s The Giving Tree, and only see what has become a largely denuded wasteland.”Also in This Issue
“How Germany Keeps Amazon at Bay and Literary Culture Alive,” by Michael Naumann
“Search Gets Lost,” by Anthony Grafton

Steve WassermanSteve Wasserman, publisher and executive director of Heyday Books, based in Berkeley, California, is a consulting editor to Yale University Press. Tom Hayden’s Hell No: The Forgotten Power of the Vietnam Peace Movement, will be published in January.